IEG Working Paper 2011/10

Guatemala: World Bank Country-Level Engagement on Governance and Anticorruption Stefano Migliorisi Anwesha Prabhu

©2011 Independent Evaluation Group, The World Bank Group 1818 H St., NW Washington, DC 20433

IEG: Improving World Bank Group Development Results Through Excellence in Evaluation

The Independent Evaluation Group is an independent unit within the World Bank Group; it reports directly to the Bank’s Board of Executive Directors. IEG assesses what works, and what does not; how a borrower plans to run and maintain a project; and the lasting contribution of the Bank to a country’s overall development. The goals of evaluation are to learn from experience, to provide an objective basis for assessing the results of the Bank’s work, and to provide accountability in the achievement of its objectives. It also improves Bank work by identifying and disseminating the lessons learned from experience and by framing recommendations drawn from evaluation findings. IEG Working Papers are an informal series to disseminate the findings of work in progress to encourage the exchange of ideas about development effectiveness through evaluation. The findings, interpretations, and conclusions expressed here are those of the author(s) and do not necessarily reflect the views of the Board of Executive Directors of the World Bank or the governments they represent, or IEG management. The World Bank cannot guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply on the part of the World Bank any judgment of the legal status of any territory or the endorsement or acceptance of such boundaries. ISBN 13: 978-1-60244-207-8 ISBN 10: 60244-207-X Contact: IEG Communication, Learning and Strategies (IEGCS) e-mail: ieg@worldbank.org Telephone: 202-458-4497 Facsimile: 202-522-3125 http:/www.worldbank.org/ieg

Contents

Abbreviations .......................................................................................................................... v

Preface .................................................................................................................................... vii

Summary .................................................................................................................................. 1

1. Introduction ......................................................................................................................... 1

Background: 2007 GAC Strategy and Implementation Plan ................................................ 1

IEG GAC Evaluation and Country Case Studies .................................................................. 3

2. Guatemala Country Context .............................................................................................. 1

Public Sector Governance ..................................................................................................... 3

Investment Climate ............................................................................................................... 5

Basic Service Delivery .......................................................................................................... 5

3. Relevance of World Bank Engagement on GAC Issues .................................................. 9

Country-Level Relevance ..................................................................................................... 9

Sector-Level Relevance ...................................................................................................... 10

Project-Level Relevance ..................................................................................................... 14

4. Chapter Effectiveness of World Bank Efforts ................................................................ 15

Country-Level Effectiveness .............................................................................................. 15

Sector-Level Effectiveness ................................................................................................. 15

Project-Level Effectiveness ................................................................................................ 17

5. Impact of the 2007 GAC Strategy Implementation ....................................................... 19

6. Lessons Learned ................................................................................................................ 21

References .............................................................................................................................. 23

Boxes

Box 1-1. The Multiple Objectives and Guiding Principles of the 2007 GAC Strategy............ 1 Box 3-1. Guatemala—SIAF, SIAF-MUNI, SIAF Mirror, and Guatecompras ....................... 11

Figure

Figure 4-1. Guatemala—Share of Projects at Risk ................................................................. 18

Table Table S-1 Guatemala—Summary IEG Assessment ................................................................ 2

Appendixes Appendix A. Persons Interviewed .......................................................................................... 25 Appendix B. Guatemala—Country Data Sheet, IEG Ratings of GAC Responsiveness, 2004-2010......................................................................................................................................... 26 Appendix C. Statistical Tables ................................................................................................ 27

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Abbreviations

AAA Analytical and advisory activities APL Adaptable program loan CAS Country Assistance Strategies CASCR CAS Completion Report CCT Conditional Cash Transfer Program CDD Community Driven Development CEH Historical Clarification Commission (Guatemala) CFAA Country Financial Accountability Assessment CGAC Country Governance and Anticorruption CICIG UN Commission against Impunity in Guatemala CIDA Canadian International Development Agency CIG Cámara de Industrias de Guatemala CoST Construction Sector Transparency Initiative COVIAL The National Road Fund (Guatemala) CPAR Country Procurement Assessment Report CPIA Country Policy and Institutional Assessment CPS Country Partnership Strategy CSO Civil society organization DAC Development Assistance Committee DPL Development Policy Loan ESAF Enhanced Structural Adjustment Facility ESW Economic and sector work EU European Union FIS Social investment fund FONAPAZ National Fund for Peace FY Fiscal year GAC Governance and anticorruption GAVI Global Alliance for Vaccines and Immunization GDP Gross domestic product GEF Global Environment Facility GPF Governance Partnership Facility Guatecompras The online procurement information system (Guatemala) IBRD International Bank for Reconstruction and Development ICA Investment Climate Assessment ICR Implementation Completion and Results ICT Information and Communications Technology IDA International Development Association IDB Inter-American Development Bank IEG Independent Evaluation Group IFAD International Fund for Agricultural Development IFC International Finance Corporation ILO International Labor Organization IMF International Monetary Fund INT Department of Institutional Integrity (World Bank) LIL Learning and Innovation Loan MFP Mi Familia Progresa (Conditional Cash Transfer Program) MINUGUA United Nations Verification Mission in Guatemala MTEF Medium-Term Expenditure Framework NGO Nongovernmental organization ODA Official development assistance OECD Organization for Economic Co-operation and Development PEFA Public Expenditure and Financial Accountability assessment PER Public Expenditure Review

PETS Public Expenditure Tracking Survey PFM Public financial management PIP Public Investment Program PIU Project implementation unit PRGF Poverty Reduction and Growth Facility PRSP Poverty Reduction Strategy Paper SAF Structural Adjustment Facility SEPA Procurement Plan Execution System SIAFMUNI Municipal Financial Management SWaP Sectorwide Approach (World Bank) TTL Task team leader UNAIDS United Nations Program on HIV/AIDS UNDP United Nations Development Program UNFPA United Nations Population Fund UNHCR United Nations High Commissioner for Refugees UNICEF United Nations Children’s Fund UNODC United Nations Office on Drugs and Crime USAID United States Agency for International Development USD United States Dollar VAT Value added tax WDR World Development Report WFP World Food Program WTO World Trade Organization

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Preface

This case study summarizes the findings of desk reviews and a country field visit carried out in January 2011 as part of IEG’s evaluation of the 2007 Governance and Anticorruption Strategy. The case study evaluated the relevance and effectiveness of Bank support for governance and anticorruption efforts over the FY2004-10 period, assessed the contributions of 2007 GAC strategy implementation, and identified early outcomes and lessons.

The Guatemala case study was prepared by Stefano Migliorisi (lead) and Anwesha Prabhu. as a background paper for IEG’s GAC evaluation. The report was prepared under the supervision of Navin Girishankar and the overall guidance of Cheryl Gray and Ali Khadr.

The authors are grateful to officials from the Government of Guatemala and the World Bank’s Country Team for constructive discussions. They are also grateful for comments from the IEG’s GAC Evaluation team members. Barbara Balaj provided editorial support and Aimée Niane provided administrative support.

The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors and do not represent the views of the World Bank, its Executive Directors, or the countries they represent.

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Summary

Guatemala emerged in 1996 from a 36-year civil war that caused almost 200,000 deaths, 83 percent of which were from the indigenous population. The long civil war left a legacy of parallel states and widespread impunity that provided a fertile ground for drug cartels. Military and criminal powers have contacts and influence with all the major political parties, and therefore with the legislative and executive branches of government, regardless of which party is in power. Over the 2004-10 period, the Bank’s engagement on GAC issues in Guatemala was defined by a single, overarching priority or entry point—core public sector management focusing mostly on public financial management (PFM) and, to a lesser extent, decentralization. There was also a strong focus on supporting public financial management systems, transparency and anti-corruption efforts of the last two administrations. However, the results achieved have been strong only with respect to the increase in transparency attributable to a new Access to Information Law, and supported by a series of Development Policy Loans (DPLs), modern computerized systems and the understanding, through effective analytic and advisory activities (AAA) and use of Country Governance and Anticorruption (CGAC) resources, of the main challenges ahead.

At the project level, the governance focus has been significantly sharpened. Sector specific governance elements within project design (such as standardization of processes, contracting of skilled personnel, implementation of systems such as the SEPA (Procurement Plan Execution System), and action plans to help prevent corruption and misuse of funds) have been strengthened. So too, the control and use of electronic systems to reduce fiduciary risks have been enhanced. Although outcome ratings for Bank projects in Guatemala are higher than both the worldwide average for all developing countries and regional benchmarks, the percentage of projects at risk by number or value is much higher than the regional average and has been worsening over time. The main cause of such problems is the very limited staff continuity in both ministries and project implementation units (PIUs), a reflection of the governance challenges posed by a weak civil service.

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Table S-1 Guatemala—Summary IEG Assessment

GAC Elements IEG Ratings

Relevance Effectiveness 1. GAC at Country Level ■■ ■■ 2. GAC in Sector Level

Core Public Sector Public Financial Management and Decentralization ■■■ ■■

Domestic Accountability Systems ■■■ ■■ Transparency and Anti-Corruption ■■■■ ■■

Basic Service Delivery Roads ■■■ ■

Primary Education ■■■■ ■■ 3. GAC at Project Level

Country Team Awareness and CGAC Team ■■■ ■■■

Use of Country Systems ■ ■ 4. 2007 GAC Strategy Implementation

Understanding of key governance challenges in Guatemala ■■■ ■■■

Staff attitudes towards GAC issues ■■■ ■■■

Ratings: ■ negligible ||| ■■ moderate ||| ■■■ substantial ||| ■■■■ high Source: IEG

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1. Introduction

Background: 2007 GAC Strategy and Implementation Plan

1.1 The 2007 strategy—a corporate strategy—set forth several objectives relating to the development of capable and accountable states and committed the Bank to seven principles of engagement on GAC issues (Box 1-1). In response to shareholder concerns about the perceived arbitrariness of senior management decisions to cut off lending to certain countries, the strategy reiterated the Bank’s use of rules-based criteria for allocating resources, as well as its aim to stay engaged even in poorly governed countries to ensure that the “poor do not pay twice.” At the same time, the strategy placed considerable emphasis—more than earlier strategies—on safeguarding Bank funds from fiduciary risks. Early on, it was acknowledged that, to achieve its “vision of success,” the strategy required a more detailed implementation plan.

Box 1-1. The Multiple Objectives and Guiding Principles of the 2007 GAC Strategy

1. The GAC strategy had several objectives: “to support poverty reduction….” “…[by] developing capable and accountable states ….[undertaking]

sound policies, improving service delivery, [establishing] rules for markets, combating corruption,” and

“…to ensure that its funds are used for their intended purposes.”

2. In addition, the “GAC guiding principles” were as follows: Focus on “[a] capable and accountable state to create opportunities for

poor people, provide better services, and improve development outcomes.”

Country ownership and leadership are key. Country government is the principal counterpart.

Remaining engaged so the poor do not pay twice. Consistent approach across countries, even though one size does not fit

all. Engage broad set of stakeholders with focus on transparency,

accountability, and participation. Strengthen rather than bypass country systems. Harmonization (the Bank will not act in isolation).

Source: World Bank documents.

1.2 The implementation plan (IP) sought to define concrete steps for “what the World Bank itself will do to support the GAC agenda, and how it will work with governments, domestic stakeholders, and development partners to support country-level governance improvements and regional and global initiatives.” The plan’s success was to be measured by (i) a significant and growing number of countries seriously addressing key governance impediments to development effectiveness and poverty reduction; (ii) Bank-supported projects and programs increasingly addressing GAC impediments; and (iii)

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countries and global partners valuing and respecting the Bank’s capacity in this area (World Bank 2007a). It was envisaged that these objectives would eventually be reflected empirically in improvements in country governance performance.

1.3 To this end, the IP proposed to deliver guidance materials, tools, training, incremental resources, and strategic staffing to help deepen Bank engagement in the following areas:

GAC-in-Countries. These initiatives sought to enhance Bank-country engagement on governance and anticorruption issues. Initially, country-GAC (CGAC) processes—comprising joint workshops, peer-to-peer learning events, clinics, and upstream assessment activities—were launched in 27 countries to help Bank teams systematically diagnose governance challenges and identify ways of addressing them through CAS design, sector strategies, and project preparation. The CGAC processes were intended to deepen the Bank’s understanding of what can be done to strengthen GAC in CASs and help identify governance entry points (for example, core public management and accountability institutions, private sector engagement, and demand-side capacities and frameworks). Following the CGACs, a more targeted effort involving 18 countries sought to enhance GAC responsiveness with the help of considerable support provided under the Window One facility of the Governance Partnership Facility (GPF).1

GAC-in-Sectors and GAC-in-Projects. These efforts aimed to strengthen incentive and accountability frameworks in sector dialogue and project design, as well as systematic risk assessment and management (for example, through the use of political economy analysis, actionable governance indicators, and demand-side measures). Guidance notes and toolkits were designed to advise Bank teams on how to address GAC issues in the sectors and to support cross-cutting concerns, such as social accountability (World Bank 2008b and 2009c). Also included were handbooks, tools, and training to support efforts to prevent fraud and corruption in projects.2 A 2009 Quality Assurance Group (QAG) survey of projects approved in FY08 aimed to establish a baseline for incorporation of “generic” GAC elements in projects (World Bank 2009f).

Global GAC Efforts. The Bank proposed to increase its involvement in peer learning networks and collaborative governance initiatives. These included the Extractive Industries Transparency Initiative (EITI) and global and regional legal conventions such as the Stolen Asset Recovery (StAR) Initiative,3 Medicines Transparency Alliance (MeTA), and Construction Sector Transparency (CoST)

1 World Bank (2008a); IEG, Back-to-Office Report, October 2010. 2 Recent efforts included the introduction of new procurement and financial management risk management systems (P-RAMS and PRIMA). 3Closely related were efforts to help strengthen the integrity of financial sectors in developing countries through a sound Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT) regime. More recently, the Bank helped launch of the International Corruption Hunters’ Network to facilitate closer cooperation among enforcement agencies around the world.

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Initiative. In addition, the Bank sought to harmonize GAC policies (for example, on cross-debarment) with other multilateral development banks, and to establish common response principles for high-risk countries under the auspices of Gov-Net.

1.4 Internal Reforms. Other important internal reforms were carried out as complements to the GAC agenda, including implementation of Volcker Panel recommendations on strengthening the Integrity Vice Presidency,4 launch of a new WBI strategy emphasizing multi-stakeholder engagements (World Bank 2009a), update of the Bank’s disclosure policy, launch of a new Operational Risk Assessment Framework (ORAF) for investment lending,5 the recruitment of a Chief Risk Officer, an annual integrated risk monitoring report, and other efforts to modernize investment lending (World Bank 2011a).

1.5 Resourcing the Strategy. Significant incremental budgetary and donor resources were deployed over the FY08–12 period to support GAC implementation. This comprised $54 million in incremental Bank budget as well as $61 million in donor funds allocated through the GPF. The GPF was supported by the United Kingdom, the Netherlands, and Norway.

1.6 Change Management. GAC implementation was viewed as a significant change management agenda. Institutional arrangements to support this Bank-wide initiative prominently featured a GAC Council, consisting of the Vice Presidents and chaired by the Managing Directors. The Council was supported by a GAC Secretariat, various other partnership secretariat units, and GAC focal points in Regional and network units. The Bank also periodically sought the advice of a Group of External Advisers, an Independent Advisory Board (that advises the President and Audit Committee on Integrity Vice Presidency performance), and an International Technical Advisory Group (that advises on the Use of Country Systems pilot).

IEG GAC Evaluation and Country Case Studies

1.7 The evaluation aims to help enhance the Bank’s approach to governance and anticorruption and to improve its effectiveness in helping countries develop capable and accountable states that create opportunities for the poor. Pursuant to this objective, the evaluation assessed the relevance of the 2007 GAC strategy and implementation plan, as well as the efficiency and effectiveness of implementation efforts in making Bank engagement with countries and other development partners more responsive to GAC concerns. It also sought to identify early lessons about what works and what does not in helping to promote good governance and reduce corruption.

4 Recommendations included the establishment of an Independent Advisory Board; appointment of an external member of the Sanctions Board as the chairperson; development of a confidentiality protocol; transfer of the responsibility for staff misconduct from the Integrity Vice Presidency to Bank’s office of Ethics and Business Conduct ; enhancement of selected staff rights to improve fairness of internal investigations; expansion of the Preventive Services Unit; strengthening of communication between the Integrity Vice Presidency and the Regions; and refinement of Integrity Vice Presidency results metrics. See Volcker and others (2007). 5 Four out of 11 ORAF risks relate to GAC: country risk, sector/multisector institutional, implementing agency governance risks, and implementing agency fraud, and corruption risks.

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1.8 A key component of the evaluation involved case studies of six country programs over the FY04-10 period: these case studies assessed the quality of Bank country engagement on GAC issues, and identified what has worked and what has not in implementing GAC efforts. Case studies were selected from a quasi-random sample of twelve candidate countries, which sought to ensure representation across geographic regions and countries that received special GAC support over the FY07-10 period. Based on IEG’s desk review of GAC responsiveness, country programs with documentary evidence of some degree of GAC-responsiveness over the pre- and post-GAC periods were selected for case studies. Accordingly, case studies were conducted in Azerbaijan, Bangladesh, Cambodia, Guatemala, Liberia, and Moldova. Field missions to these countries were undertaken between December 2010 and February 2011. Case studies were reviews from World Bank country teams and comments were duly incorporated.

1.9 This evaluation reviewed the work by the Bank and other donors in core public sector areas and possible links with improvements in service delivery. The mission looked at the opportunities for using country systems, third-party monitoring mechanisms, enhanced donor coordination, and other processes that are part of the GAC agenda. Also examined were geographic effects and other strategic elements that might affect the willingness of the government to reform, and the leverage that the Bank and other donors might have in promoting reform. Finally, the mission assessed whether opportunistic responses to governance challenges might contribute to a future portfolio-wide approach to improving governance. 1.10 The Guatemala case study is based on an extensive desk review as well as a field visit to Guatemala City from January 15-22, 2011. It evaluates the relevance and effectiveness of Bank support for governance and anticorruption efforts since the launch of the Bank’s Governance and Anticorruption (GAC) Strategy in 2007. It elaborates on a desk review of the GAC responsiveness of the Bank’s Guatemala program and reviews the following GAC entry points: core public sector reform (public financial management); the accountability system (including social accountability issues); and GAC in sectors (roads, education). The case study also examined the extent to which the Bank’s GAC Strategy has made a difference in staff attitudes toward addressing GAC issues in their operational work.

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2. Guatemala Country Context

2.1 Guatemala is a country of deep divisions. Independent since 1821, it has the largest proportion of indigenous population in Central America (42 percent in 2002), speaking 24 indigenous languages. The various ethnic groups are not politically cohesive. Land ownership, as well as most wealth, is in the hands of a small elite, and the country has one of the most unequal distributions of income in the world with the bottom quintile accounting for only 6 percent of consumption and the top quintile over 50 percent as of 2006 (World Bank 2009c). Although the situation has improved since the year 2000, half of the population remains in poverty and there has been no improvement in extreme poverty over the past 10 years. Poverty rates among indigenous households remain over 75 percent (50 percent higher than the national average), and extreme poverty is almost double the national average.

2.2 Inequality goes beyond income and is reflected in social indicators that are low compared to other countries with similar income levels. Guatemala has one of the worst levels of stunting worldwide (54 percent), mostly in the indigenous population (8 out of 10 indigenous children are stunted compared to 4 out of 10 among non-indigenous children). About one in every five poor, rural, and indigenous children do not attend primary school.

2.3 Guatemala emerged in 1996 from a 36-year civil war that caused almost 200,000 deaths, 83 percent of which were from the indigenous population. The long civil war left a legacy of parallel states (Briscoe 2008) within the country that serve their own factional interests in combination with organized crime networks and armed groups. According to the Myrna Mack Foundation, a local human rights non-governmental organization (NGO), these illegal groups have existed for decades, and have always exercised the real power in Guatemala. These structures are often embedded within the existing state structure. Independent reports by Amnesty International (2002), the United Nations Verification Mission in Guatemala—MINUGUA, and the Historical Clarification Commission established under the terms of the Peace Accords, highlighted the role these illegal groups played during and after the civil war. The report Guatemala: Memory of Silence, published by the Historical Clarification Committee in 1999, concluded that “Impunity permeated the country to such an extent that it took control of the very structure of the State, and became both a means and an end. As a means, it sheltered and protected the repressive acts of the State, as well as those acts committed by individuals who shared similar objectives; whilst as an end, it was a consequence of the methods used to repress and eliminate political and social opponents.” The impunity index calculated by the United Nations Comisión Internacional Contra la Impunidad en Guatemala (CICIG, established in 2007) in its latest report was at 99.75 percent in 2009.

2.4 The parallel power structures were modified and somehow strengthened by trends in transnational crime across the Central American region. According to the U.S. International Narcotics Control Strategy Report (2010), 250 metric tons of cocaine transited through Guatemala in 2009, equivalent to about 28 percent of all cocaine produced in South America according to the United Nations Office of Drugs and Crime (2010), and worth about $16 billion. No more than 1-2 percent is seized by Guatemalan police each year. A recent UN

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report67 found that several Mexican drug cartels, pushed south by Mexican police, found fertile ground in Guatemala, particularly in the region of Petén where jungle landing strips provide easy access to the Mexican border.

2.5 Central American countries such as Guatemala are simply victims of their geographical location on the route from drug production to consumption. As a result of cocaine trafficking, the murder rate in Petén has become the highest in Guatemala at 98 per 100,000 inhabitants in 2009, in a region (the Northern Triangle of Central America comprising El Salvador, Guatemala, and Honduras) that already has the highest murder rate in the world. The United Nations Office of Drugs and Crime reports highlights the infiltration of transnational organized crime in Guatemala: “The repeated arrests of high level officials in the police and the military, in contrast, suggest that the main traffickers in Central America are far more sophisticated than street gangsters, and are tied to some members of the ruling elites, rather than the underclass. There is also growing evidence of Mexican cartel penetration into Central America, particularly regarding Los Zetas in Guatemala.” Drug cartels today control up to 40 percent of Guatemalan territory, the so-called red zones, and, as the Medellin Cartel did in the 1990s, offer social services to the population that the state cannot afford.8

2.6 Crime and corruption have spread in Guatemala over the six years covered by this evaluation. According to the Americas Barometer, produced by Vanderbilt University and funded by the United State Agency for International Development (USAID), 21 percent of Guatemalans were victimized by corruption in 2010 compared to 20 percent in 2008 and in 19 percent in 2004. Twenty-three percent of Guatemalans were victims of crime in 2010 compared to 17 percent in 2008 and 13 percent in 2004. The deterioration on the criminal front has been particularly steep. One hundred twenty-five thousand gang members are estimated to operate in Guatemala—compared to a police force of 20,000. There has also been a 47 percent increase in cocaine trafficking since 2006. Human trafficking, particularly of children for illegal adoption, and prostitution, remain a significant problem in Guatemala.

2.7 Most political analysts believe that military and criminal powers have contacts and influence with all the major political parties, and therefore with the legislative and executive branches of government, regardless of which party is in power (Peacock and Beltrán 2003; 33). The alliance of hidden powers and drug cartels was a natural step considering the control the former have on several regions of Guatemala. Through the consolidated channels of these parallel states, money from the drug cartels has been funding political parties in Guatemala. These parties, as well as cartels and hidden groups, compete among themselves to control power in the country. As a result, the political landscape has become even more fragmented over the past decade.

2.8 During the upcoming election, Transparency International expects Guatemalan parties to spend $20 to $30 million each. Illegal loans received during the campaign are later

7 UNODC 2010, Chapter 11, “Regions Under Stress: When TOC Threatens Governance and Stability.” 8 ICG 2009, Guatemala at a Crossroads.

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returned through political favors, including lucrative government contracts. Oversight of campaign financing by the Supreme Electoral Tribunal is ineffective. According to Freedom House, roughly 40 percent of the parties competing in the 2007 elections did not provide the tribunal with their campaign budgets as required, and 12 percent did not submit final financial reports.

2.9 Not surprisingly, a sizeable number of Guatemalans report that they do not trust their politicians and central authorities, although they are, at the same time, deeply involved in political activities at the local level, in part due to ethnicity. The links between crime and politics have become so evident as to undermine an already fragile trust of Guatemalans in their institutions. The 2010 Americas Barometer found that Guatemala has the third-lowest level of support for stable democracy (63 percent) out of 26 countries in the Americas, and the fifth-lowest level of interest in politics (31 percent).

2.10 Guatemala has also witnessed one of the steepest declines in satisfaction with democracy (from 52 percent in 2008 to 48 percent in 2010), and it was the only country in the region where support for a coup grew significantly from 38 percent in 2008 to 46 percent in 2010. However, Guatemalans are deeply involved in democracy at the local level with, for example: the second highest participation in parents’ associations (30 percent), the third highest in community improvement groups (23 percent), the fourth in attendance of municipal meetings (16 percent), and the fifth in demand making from municipal governments (16 percent, with 52 percent of respondents satisfied with the services received).

2.11 The lack of trust in institutions and the habits developed by many enterprises during the civil war explain why the level of tax revenues in Guatemala is so low (10.12 percent of gross national income in 2010 versus a target of 13.2 percent in the Peace Accords of 1996 and an 18 percent average for the region). This is due also to the many loopholes in tax legislation and the interpretation given by the judicial system with several unfavorable constitutional court rulings on taxes. The Guatemalan tax system is also highly regressive considering the relative importance of indirect taxation (71 percent of tax revenues in 2010). This vicious circle of low resources and mistrust has generated a very limited ability to invest in education and social services. The level of social expenditure over gross national income has grown only marginally from 6.1 percent in 2001 to 6.5 percent in 2010 (Ministry of Finance), even though most of the Guatemalan social health and education indicators are in the lowest quartile worldwide.

Public Sector Governance

2.12 Guatemala’s Transparency and Anti-corruption Agenda is one of the government’s main priorities. It is being led by the Vice President along with the Minister of Finance, who is, in turn, leading efforts on fiscal transparency together with the Vice Minister of Finance for Transparency. This opened the way for the creation of the CICIG, which started trials against a former President, several ministers, and a former Comptroller General, among others.

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2.13 With limited fiscal space, the quality of public expenditure is particularly important. Two significant achievements in Guatemala during the 2004-10 period are noteworthy. First, public financial management has been improved through the completion of the SIAF (Sistema Integrado de Administración Financiera- Integrated System of Financial Administration), which was built upon a good normative framework and a modern technological platform. SIAF has now been deployed in all central ministries and in 300 municipalities (SIAF-MUNI), and is considered one of the best regional practices in automated public financial management. SIAF allows government to keep track of all payments and provide up–to-date data on a large share of public expenditures. Guatecompras, the online procurement information system launched in 2003, provides information on all public tenders in the country by all entities of the central government and 331 of the 335 municipalities.

2.14 Second, the Access to Public Information Law, passed in 2009, grants all citizens access to fiscal information. The SIAF offers several web-based points of access through fiscal transparency portals.

2.15 In spite of these efforts, the incentives against more effective public spending are still very strong and many taxpayers benefit from various loopholes in the overall public sector governance framework. Although the overall Country Policy and Institutional Assessment (CPIA) indicators place Guatemala as a middling performer among its comparators, two recent pieces of analytic work funded or carried out by the Bank have highlighted serious pitfalls in the system that more than counterbalance the progress made so far.

2.16 First, the 2010 Public Expenditure and Financial Accountability (PEFA) highlighted several important issues: the use of trust funds, NGOs, and international agencies, to bypass the SIAF system and spend public resources largely outside the control of the Comptroller General Office (reaching 13 percent of public expenditure in 2009), or risk committing a crime by misusing resources and having ineffective internal controls for the period 2006-08 (World Bank 2010). There was no internal quality control or external quality assessment of the Comptroller General Office (CGC). Parliament expressed no opinion on the CGC’s Annual Report, in part due to Parliamentarians’ limited knowledge of public financial management (PFM).

2.17 Second, an evaluation of the National Public Procurement System of Guatemala, carried out as part of the Bank’s program of economic and sector work using the indicators-based tool jointly developed by the Bank and the Development Assistance Committee of the Organization for Economic Co-operation and Development (OECD-DAC), found that the most serious problems in Guatemalan public procurement were the dispersion and fragmentation of public procurement, the lack of standard procurement documents and guidelines, and, above all, the fact that 84 percent of public procurement in the country used extraordinary processes and 6 percent sole sourcing for a total of 90 percent of national public procurement carried out in a noncompetitive fashion. Guatecompras, conceived as an e-procurement system, has become only a procurement information portal, with limited information disclosure in practice and largely ineffective auditing of the information provided by the contracting authorities. In addition, there is no unified public procurement registrar of suppliers, but several registries of prequalified bidders. There is also no

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independent procurement tribunal to handle complaints, which are extremely high by international standards (16 percent of procedures in the five entities included in the sample analyzed for the study). Payment procedures are not standardized, and the decision to pay is often subjective, with ample opportunities for corruption.

2.18 The Guatemalan civil service has very low capacity compared to the rest of the region, scoring at half of the regional average in a 2005 Inter-American Development Bank assessment. Any attempt toward reform has been blocked by a political class that considers civil service an important form of patronage. The civil service suffers from low pay, lack of continuity in managerial positions, and petty corruption. According to Freedom House, 18 percent of all civil servants are currently political appointees, by far the highest proportion in the region. Performance evaluations are often replaced by partisanship. Top-ups funded by donors are frequent in many ministries.

2.19 The independence of the judiciary is very limited. Judges do not have security of tenure, and international support for judicial reform has focused more on court judges than on the court of appeals or the Supreme Court. Complaints against judges are usually dismissed (only three complaints out of 910 in the period 2006-08 led to the dismissal of judges). The overall judicial system is largely ineffective and the impunity rate extremely high.

Investment Climate

2.20 Firm-level surveys in Guatemala show a divergent picture, but they are also not up to date as they refer last to 2007. It is clear that security has become a major concern for the private sector, as shown by the October 2010 open letter of the Cámara de Industrias de Guatemala (the chamber of industry), calling upon President Colom to implement within 30 days an eight-point proposal to make domestic security a national priority. Although corruption was still the main constraint for firms in 2007, its relative importance had declined compared to 2003. It is surprising given the dramatic growth of crimes and violence in the country over the period that crime fell from a close second position in 2003 to a distant fourth place in 2007.

2.21 The present government’s limited interest in private sector development is a major concern. Private sector growth is affected by the difficult governance and anticorruption situation, particularly for small-size firms. According to a World Bank Institute diagnostic, mid-sized and large firms spend one percent of their turnover on bribes compared to four percent for smaller firms. Moreover, low education levels affect the quality and productivity of the workforce.

Basic Service Delivery

2.22 In 2002, Guatemala’s road system comprised approximately 26,000 kilometers of roadway, of which only 15,000 kilometers were classified. Jurisdictionally, there were four types of roads: main, secondary, departmental, and rural. The DGC (Dirección General de Caminos- General Direction for Roads), under the aegis of the Ministry of Communications, was responsible for building, rehabilitating, and maintaining a large part of the classified

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road network. The DGC also apportions funds among regional offices for road works. The main road networks receive funding for their maintenance from COVIAL—the national road fund, which was created in 1996. COVIAL is financed by a fuel surcharge of Q.1 per gallon of fuel. Approximately $70 million is collected from this surcharge per year and these funds are not ring-fenced but transferred, in whole or part, from the Ministry of Finance to COVIAL through the regular budgeting process.

2.23 Rural roads constitute about 63 percent of the country’s road system, with a length of approximately 19,000 kilometers. Rural roads are maintained variously by municipalities, communities, finca (property) owners, or others (FIS no longer exists) such as the National Fund for Peace or FONAPAZ, FONADES, and others. Even though the municipalities are co-financing works under the Second Rural and Main Roads project, these maintenance entities rarely receive central government financing for road maintenance activities. As a consequence, less than half of Guatemalan rural roads are in good condition, with only one-third receiving any maintenance, and probably less than 5 percent undergoing routine maintenance. An insufficient road network, especially in rural areas, is a large contributing factor in the poverty profile of the country. The absence of all-weather roads limits access to basic services, especially for the poor.

2.24 Although road infrastructure is improving, within the Central American economies Guatemala has the poorest road infrastructure. Its total road density, whether measured relative to territory or population (1.11 kilometer per 100 people compared to a regional average of 2.53), is lower than all other countries of the region. Key governance issues in the sector are linked to the lack of transparent procurement procedures, leading to arbitrary decisions in the selection of contractors and in their payment, particularly for projects that cut across different governmental levels. COVIAL uses exceptional procedures for most of its procurement. The use of floating debt to pay for some of these works and the ensuing long payment delays, in addition to the arbitrary procedures, make construction work attractive to companies controlled by organized crime. These companies then use them for money laundering and are less concerned about payment delays than ordinary contractors.

2.25 Guatemala’s primary education system is improving. Primary net enrollment rates grew from 84 percent in 2000 to 95 percent in 2008, and the primary completion rate increased from 58 percent to 80 percent over the same period. Although there has been substantial progress, the main issue for primary education in Guatemala remains the efficiency and quality of education. Gross enrollment rates are very high (over 100 percent in the first grade), reflecting high levels of repetition and drop out. The appraisal mission of the Bank’s Education Quality and Secondary Education Project found that in 2004, by the time a cohort reached 12 years of age, only 22 out of 100 children completed primary education on time. Almost 85 percent of primary education is provided by schools under the control of the central government, two percent by local governments or cooperatives, and the balance by private schools and NGOs. Led by the Ministry of Education, the government aims to provide quality basic education for all. Unfortunately, resources devoted to education have not been increased to achieve this goal.

2.26 The government launched a conditional cash transfer (CCT) program called Mi Familia Progresa (MFP) in 2008 as a Trust Fund under the Council of Social Cohesion,

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headed until recently by the First Lady. The Council coordinates the various ministries and departments for targeted social spending in municipalities with higher poverty rates and extreme poverty. The MFP is the flagship poverty alleviation program of the Colom administration. The program was designed to ensure the health and nutrition of families with sons or daughters from birth to 6 years of age, levels of school attendance from ages 6 to 15 years, and provide for the health and nutrition of pregnant and lactating women, with the aim of promoting education and the development of children and youth in Guatemala. Health problems, lack of interest, and economic needs were in fact mentioned 7 out of 10 times as the reason for dropping out or not enrolling in primary school in Guatemala. The MFP tries to address these obstacles through cash transfers to the poorest families as well as through improvements in the supply of public education and health services. So far, MFP has benefitted over 900,000 families with 2.5 million children.

2.27 A study funded under Country Governance and Anticorruption (CGAC) Initiative found that most recipients gave positive feedback on the MFP program. Two-thirds use the transfers to buy food and are aware of the obligations of sending their children to school and to regular health checkups. At the same time, the increased use of public education and health services brought to light dissatisfaction with the quality of school infrastructure. A review by Transparency International’s branch in Guatemala (Accion Ciudadana) found several problems with the MFP. First, the selection of beneficiaries is deemed opaque by interviewees who do not understand the process of means testing. Second, there was a negative perception of the quality of education and particularly of health services supported by the program. Third, there is no effective redress mechanism for complaints.

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3. Relevance of World Bank Engagement on GAC Issues

3.1 The Bank’s engagement on GAC issues in Guatemala dates back several years before the launch of the 2007 GAC Strategy. This case study builds on a desk review undertaken by IEG, which found the Guatemala country program relatively GAC-responsive along various dimensions between 2004 and 2010. These include: (i) selectivity of GAC entry points (although slightly less post-GAC); (ii) a focus on strengthening country systems (dating back to 1996, immediately after the end of the civil war); (iii) fighting against corruption; and (iv) to a lesser extent, fiduciary risk management. In addition, projects approved during this period improved in their design. There has been a stronger focus on anticorruption and transparency in the post-GAC period both in the strategy and in the management of the Bank’s portfolio. Not surprisingly, given the state or Guatemala’s procurement systems, sample projects approved in recent years were less apt to use country systems. According to the latest Public Expenditure and Financial Accountability (PEFA) report, donors to Guatemala used country systems only for budget support and part of their support for decentralization (World Bank 2010).

COUNTRY-LEVEL RELEVANCE

3.2 Over the 2004-10 period, the Bank’s engagement on GAC issues in Guatemala was defined by a single, overarching priority or entry point (core public sector management focusing mostly on PFM and, to a lesser extent, decentralization) with a strong focus on supporting public financial management systems, transparency, and anticorruption efforts of the last two administrations of Presidents Berger and Colom. The Bank withdrew from judicial reform after the interventions carried out under the previous Country Assistance Strategy (CAS) met their objectives but had little development impact.9 The Bank also left security to other donors (such as the United States) that presumably had a comparative advantage in this field. The window of opportunity for the Bank was provided by the strong support in the Guatemalan public for anti-corruption measures after the scandals marring the administration of President Portillo, who fled to Mexico when his immunity was revoked in 2004, and who was arrested upon request from the CICIG in 2010 on money laundering charges. However, the choice of these entry points was dictated more by continuity of efforts and a path of least resistance than by a thorough political economy assessment of the situation in Guatemala. The Bank’s approach is therefore judged to be moderately relevant.

3.3 The choice of analytic tool (Public Expenditure Review, Country Procurement Assessment Report/Country Financial Accountability Assessment) has been highly relevant. Combined with a dedicated and experienced team in the Guatemala Country Office, these activities led to a substantial sharpening of the Bank’s governance agenda in Guatemala that has benefitted other donors and will ensure a better focus of future Bank programs on governance.

3.4 The country team seems to be keenly aware of the main GAC challenges and open to innovation supported by a CGAC Team in the Country Office. The Bank established a 9 The CASCR found that “The contribution of the Bank’s judicial work is less certain as administrative gains and extended coverage do not seem to have translated into an improved public perception of judicial services.”

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CGAC team to ensure the sustainability and consolidation of GAC engagement. The CGAC team is committed to periodically review GAC progress in Guatemala and adapt its strategic approach as necessary.

SECTOR-LEVEL RELEVANCE

3.5 Public Sector Reform. Over the 2004-10 period, core public sector reform—mostly PFM reform—served as a key GAC entry point for the Bank’s engagement in Guatemala. The Bank’s support was built on an analytical base of a 2005 procurement and financial accountability assessment (Country Financial Accountability Assessment (CFAA)/Country Procurement Assessment Report (CPAR) and a 2007 Update. The World Bank’s support for strengthening of PFM institutions consisted of the following:

A $20 million additional financing to the third in a series of Integrated Financial Management Technical Assistance Projects, approved in 1995, 1997, and 2002, for cumulative financing (at current prices) for all four projects of $75 million.

A series of single-tranche programmatic development policy loans (DPLs). During the post-GAC period, the series included one DPL under the pre-GAC CAS and two under the current Country Partnership Strategy (rather than three as originally envisaged), accounting for $650 million or 67 percent of all projects approved after GAC. To improve transparency and efficiency of public resource use, the DPL series supported, among other things, the following measures: (a) the expansion of the Integrated Financial Management System (SIAF) nationwide including the launching of a fiscal transparency portal to enhance public access to budget data, and (b) the development and expansion of a transparent Web-based procurement system (Guatecompras).

CGAC grants for assessment of the use of extra-budgetary accounts, the executive branch internal audit function, implementation of the procurement plan execution system (SEPA), development and implementation of a complaints mechanism for the CCT program; support for the design and implementation of the CCT management information system, risk mapping of the CCT program, survey of beneficiaries of the CCT, and the SIAF Mirror.

3.6 The Bank supported the country’s auditing authority, CGC, through a component of the Third Integrated Financial Management Technical Assistance Project and a Bank-managed grant from the Netherlands. The support went toward strengthening of the investment planning and management capacity at the municipal level and integration into the SIAF; building capacity to carry out specialized nonfinancial audits, and promote public participation in public sector financial management oversight, including the creation of a claims and allegation center concerning public finance mismanagement. Due to delays in approval, the project will close without fully disbursing funds for CGC support. Through CGAC, the Bank has also supported the oversight role of Parliament. This focus on the full accountability system is certainly in line with the latest thinking on accountability frameworks at the Development Assistance Committee (DAC) Network on Governance ( GOVNET).

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3.7 The Bank’s approach to the demand side was very limited and mainly funded with about $500,000 in CGAC resources over the review period. Civil society was consulted as part of the DPL series and, according to the Implementation Completion Report (ICR) for the three DPLs up to 2007, was one of the main determinants for the successful implementation of these operations and broader ownership. The additional financing to the third Integrated Financial Management Technical Assistance Project included support for a claims and allegation center against mismanagement of public resources at CGC to promote public participation in oversight. The SIAF Mirror pilot project under CGAC helped civil society understand the information provided under its transparency initiative. The Japan Social Development Fund provided support for capacity building of indigenous people and NGOs. Finally, the International Finance Corporation (IFC) provided technical assistance and funding support for a community-based environmental monitoring committee through the Oil, Gas, and Mining Sustainable Community Development Fund.

3.8 The Bank’s approach to analytic and advisory activities has been highly relevant, focusing on important governance issues. For example, the upcoming study on procurement of medicines will cover a sector with limited competition, prices above market and a vast discretion of public officials that can lead to corruption. It is expected to improve regulation and practices of centralized procurement and supply chain management, leading to more value-for-money in pharmaceutical procurement. It is also expected to lead to enhanced understanding of the pharmaceutical market, prices, and market shares.

Box 3-1. Guatemala—SIAF, SIAF-MUNI, SIAF Mirror, and Guatecompras

SIAF incorporates automated processes and systems in budgeting, treasury, accounting, as well as substantial improvements in other areas, such as human resource management. The system is linketo Web portals that allow the public to access and consult budget-related information for most public sector institutions. It is operational in all central government agencies and most of the decentralized entities and covers approximately 300 executing-level agencies. A new framework fomunicipal financial management (SIAF-MUNI) has extended these transparency benefits to the municipal level. Most recently, a citizen-oriented portal, Consulta Ciudadana, was created with user-friendly applications to facilitate access to and interpretation of complex financial managemenreports.

The country’s e-procurement system, Guatecompras, was introduced in 2004 and has since been extended by several decrees. It is designed to publish information about all steps of a procurement process for each acquisition above Q. 30,000 (approximately $4,000). It is now operating and registering all central government agencies’ procurement transactions and is gradually being expanded to decentralized entities and municipalities.

These three systems allow citizens to access financial and procurement information. However, stakeholders continue to express discomfort with the quality, accessibility, comprehensiveness, accuracy, and consistency of fiscal information. The SIAF Mirror initiative sought to complement existing World Bank supply-side support to e-government systems with demand-side interventions to strengthen accountability of local public expenditures through civil society oversight. It also sought to produce an additional incentive to public institutions to effectively maintain their transparency systems and provide them with feedback for improvement, thus enhancing government transparency and trust of users

Source: World Bank reports.

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3.9 Relevance. The PFM reform program in Guatemala has been an important focus of Bank support to the country since the end of the civil war (Error! Reference source not found.). Given Guatemala’s challenges with effective and transparent public expenditure management as well as low capacity, this evaluation concludes that the Bank’s objectives on PFM were relevant and GAC-responsive. However, the overall design of the program did not fully take into account the political economy challenges present in the Guatemala and the sustainability of the program itself. These will undoubtedly affect the Bank’s ability to achieve long-lasting effects on transparency in the country.

3.10 Basic Service Delivery. In recent years, Bank support for new roads has been limited and includes the Second Rural and Main Roads Project (FY03), and the Project to Support a Rural Economic Development Program (FY06). Expanding Opportunities for Vulnerable Groups (FY10) includes a component on rural infrastructure comprising rural roads, but it is not effective yet for lack of parliamentary approval. The Second Rural and Main Roads Project has a component to strengthen institutional capacity to manage rural transport infrastructure on a sustainable basis. At the local level, the project aims to establish a well-functioning decentralized local governance system with the enhanced capability of managing road infrastructure. At the central level, the project aims to strengthen coordination for the management of road infrastructure and help the government adopt a national strategy for rural roads and transport, including a discussion with stakeholders. The project was designed to help the government in its efforts to push its decentralization agenda by focusing on the development of the capacity of municipalities.

3.11 One objective under the Project to Support a Rural Economic Development Program was to introduce a new model of public management focused on territorial development in the institutions involved in the program. Under the improvement of the territorial planning system, considerable attention is given to increasing capacity at all levels, including the local level, to ensure functionality and relevance. Infrastructure projects include improvement, rehabilitation, and maintenance of rural roads. One of the outcome indicators was that 100 percent of participating partners whose improvement in rural roads have been approved would have access during the whole year to critical markets.

3.12 The Bank supports GAC issues in primary education through lending projects such as the Education Quality and Secondary Education (FY07, $80 million) Project and the Expanding Opportunities for Vulnerable Groups Project (FY10, $114.5 million). Education Quality and Secondary Education aims to support increasing the fiduciary, monitoring, and evaluation capacity of the Ministry of Education. Its components include developing and strengthening regional teacher training centers, supporting Telesecundaria (video-supported teaching), and increasing the contributions of school-based management to the quality of learning. The project was restructured when the Colom administration came to power to avoid perpetuating a two tier primary education system with two classes of teachers. The restructuring was also aimed at better aligning the project with the new education strategy, based on CCT rather than parent involvement in school management. Expanding Opportunities for Vulnerable Groups is designed to support two pillars of the 2008-11 government plan: solidarity and governance. Support to the governance pillar would be achieved through activities aimed at improving management, monitoring, oversight, and controls of key interventions including the MFP, basic health, rural roads, and municipal

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development. One subcomponent of this project involves support for the monitoring and evaluation of the CCT program, which in turn would strengthen its governance, transparency, and accountability. The MFP has been criticized by opposition political parties and is subject to close scrutiny by members of Congress and the media.

3.13 Relevance. The Bank’s engagement on GAC issues in rural roads is rated as relevant, primarily due to their importance with respect to poverty reduction. The scope and likely impact of Bank support on sectoral governance, however, could vary based on the size of the portfolio relative to other donors and the degree of harmonization. Targeting in these projects has been geographic, focusing on the poorest municipalities.

3.14 Regarding the roads sector, the Bank’s focus on decentralized maintenance and construction of rural roads was pragmatic. In addition, in response to private sector and civil society demands to curb corruption in the construction sector, the Guatemalan government, with support from the World Bank, launched the Construction Sector Transparency Initiative (CoST) in November 2009. Guatemala is the first Latin American country to participate in CoST—a global pilot initiative set up by the United Kingdom’s Department for International Development (DfID) and the World Bank in 2008 to increase transparency and accountability in the public construction sector. With strong government commitment and close Bank support, the CoST initiative has made rapid implementation progress in Guatemala including the formation of a multi-stakeholder group in charge of directing the initiative, with public, private, and civil society participation. All are involved in the selection of pilot projects in public construction for information disclosure. The support to be provided through CoST is considered essential by sector associations that see CoST as a useful accountability mechanism.

3.15 The decision to address primary education issues through the MFP, the government’s flagship program on poverty reduction, was a smart choice and highly relevant. Social indicators in the country are particularly low among the indigenous population in rural areas and the program was addressing these communities directly for the first time. Instead of insisting on the preservation of the project’s original philosophy, the Bank correctly decided to influence the design of the CCT program rather than finding alternative options. However, the delays in project approval by Parliament mean that the project may start only a few months before a possible change of government and philosophy. There is a small risk that the new government may not continue the CCT program and that the Bank would be obliged to change direction just a few months after project launch.

3.16 Investment climate issues during the period were addressed through the DPL series, an Investment Lending (IL) Competitiveness Project approved in 2000, and support from IFC’s Doing Business Team. The first DPL series, approved in 2005, 2006, and 2007, had among its development objectives promoting growth and improving the investment climate. According to the Implementation Completion and Results report prepared in 2009, all prior actions were met, but some were only moderately relevant. The new series of DPLs had an almost exclusive fiscal and public financial management focus. According to the 2009 ICR, the Investment Lending project was successful in facilitating the registration of businesses, but missed its objective of having a new competition framework approved, leaving

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Guatemala as the only country in Central America without a functional legal and institutional framework for competition.

PROJECT-LEVEL RELEVANCE

3.17 Since 2007, the Bank has taken several steps to embed generic GAC elements across its Guatemalan projects. Concurrently and jointly with the Inter-American Development Bank, the World Bank supports a government initiative to develop standardized documents for its public procurement. In 2009, the Bank supported a PEFA review whose results were presented in mid-2010. At the level of the overall portfolio, significant achievements include: (i) establishment of a Single Treasury Account to execute multilateral loans; (ii) implementation, through the SIAF project, of a SIAF module to monitor infrastructure contracts; (iii) implementation of SEPA (Sistema de Ejecución de Planes de Adquisiciones), which increases transparency; (iv) improvement and increased use of Guatecompras in projects; and (v) implementation of a procurement training scheme for all PIUs.

3.18 At the project level, the governance focus has been significantly sharpened. Sector-specific governance elements within project design (such as standardization of processes, contracting of skilled personnel, implementation of systems such as SEPA, and action plans to help prevent corruption and misuse of funds) have been strengthened. The control and use of electronic systems to reduce fiduciary risks have also been enhanced. The use of beneficiary control has become more common in recent projects like the Guatemala Competitiveness Project (through the Comité Ejecutivo Ampliado of Pronacom), or the Expanding Opportunities for Vulnerable Groups (through beneficiary committees).

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4. Chapter Effectiveness of World Bank Efforts

COUNTRY-LEVEL EFFECTIVENESS

4.1 A series of analytic products funded by the Bank, a few of them through CGAC resources, have revealed a state of country systems worse than previously assessed (for example, in the 2005 CFAA/CPAR). The Bank’s ex-ante reviews are the rule rather than the exception in Guatemala, and follow-up on allegations of fraud has been prompt and appropriate. The real challenge, however, is to understand how to strengthen country systems without using the standard engineering approach to PFM. A greater focus on the issues highlighted in the GAC Strategy could have helped in addressing some issues earlier, as well as in leveraging the Guatemalan tendency to get more engaged at the local level. The depth of some PFM issues raises a question about whether a substantial level of development policy lending ($550 million under the current country partnership strategy), which played such an important role in achieving some key changes on transparency, is still appropriate in Guatemala.

4.2 The World Bank, together with other multilateral organizations, is a key player in development lending and in the strengthening of country systems. Its role elsewhere is rather marginal. A major issue for the Bank is the inability to face development challenges swiftly, as all of its loans need to be approved by Congress, and the period between project design and effectiveness can reach 30 months. The Bank has used CGAC resources as seed money for strategic interventions, but it is not well positioned in an environment where loopholes are pervasive and key players (from drug lords to warlords) move fast to undermine the state. It also lacks the tools to operate more directly with Guatemalan civil society, which is wary of any financing even indirectly controlled by government.

4.3 As mentioned in the CGAC Report, in order to harmonize its governance and transparency initiatives, the World Bank takes part in a Transparency Coordination Table, together with eleven other bilateral and multilateral donors. This is a forum where issues of division of labor are discussed. The Bank has, for instance, refrained from engaging in issues related to security where bilateral partners and the UN system are active and where the Bank lacks a comparative advantage. Building on this division of labor, the Transparency Coordination Table has developed a common agenda that is part of the dialogue with the government. It has developed—jointly with civil society institutions such as Acción Ciudadana and Coalición por la Transparencia—a harmonized governance agenda in support of the Government Transparency Agenda.

SECTOR-LEVEL EFFECTIVENESS

4.4 Substantial governance reform progress has until recently been limited primarily to aspects of core public sector management in the executive, most of all procurement and financial management systems and, to a lesser extent, budgeting, tax administration, and illicit enrichment by public officials.

4.5 As noted in IEG’s comments on the CAS completion report, there has been no proper measurement of the impact of improved financial management and procurement on

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Guatemalan public expenditure. In addition, the results framework of the latest Country Partnership Strategy (CPS) does not include measurable governance indicators, making assessment more difficult. Performance indicators focus on the establishment of governance tools such as SIAF or Guatecompras, but not on their impact on governance; no actionable governance indicator is mentioned in the 2008 CPS.

4.6 The following strengths and weaknesses in the Bank’s approach to PFM were identified:

Strengths

The Bank has been consistently involved in PFM reforms since 1996 and has contributed greatly to the establishment of reliable tools to support the recently approved Public Access to Information Act. If Guatemala had not developed such a system, it would have been more difficult to take advantage of the opportunity represented by public opinion pressure toward more transparency.

At the same time, the Bank agreed with the government on important PFM regulatory changes through a series of single-tranche DPLs. The most important prior actions concerned the implementation of SIAF and Guatecompras and public access to information. This three-pronged approach (policy lending, technical assistance, and analytic and advisory activities) allowed the Bank to understand the major issues, support some of the related policy reforms, and help the government to implement them.

Weaknesses

The approach has been somewhat focused on software and hardware rather than being more holistic. This is less a sequencing issue (the improvement in systems was necessary) than a relevance one: technical tools alone are not sufficient to improve the outcomes of PFM. An alternative, more ambitious route should be pursued, such as civil service reform.

The second weakness was sustainability. Bank support will soon end and it is unclear whether the ministry will be able to maintain the system and retain the staff under civil service conditions. The risk is similar to the one faced in roads: will there be enough resources for maintaining the system? The issue has been discussed since the CFAA/CPAR of 2005, which recommended “an institutional absorption strategy for its regulatory and information technology administration and maintenance.”

Third, there has been an excessive focus, even in Bank documents, on successes rather than failure. Guatecompras, for example, has been probably the only tangible result in procurement reform over the past 15 years. This has been known since the 2005 CFAA/CPAR: “with the exception of the introduction of the initial phase of Guatecompras, there has been no significant improvement in the quality of the procurement system since 1999.”

4.7 Several transparency initiatives have led to more significant parliamentary scrutiny by a few leading anticorruption Members of Parliament who now have direct access to data. However, even though the “pipes” (SIAF and Guatecompras) are excellent, most of the

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“water” (public financial resources) leaks before reaching these pipes. This is why, for example, Guatecompras was never allowed to become a real e-procurement system but remained a tool to publish information as reported by the various agencies without any concrete sanction for noncompliance or partial compliance. Hence, although these programs are touted as successes in several Bank documents, including the two country strategies reviewed as part of this evaluation, they have certainly achieved intermediate results on transparency. They have, however, had limited impact on the real strength of country systems in Guatemala due to the lack of political will to eliminate exceptions, special procedures, and malpractice. In addition, it is questionable whether the results achieved will be sustainable when Bank support ends in mid 2011.

4.8 Basic Services. According to the latest implementation status reports, the overall implementation progress rating is moderately satisfactory for the Education Quality and Secondary Education project and the Project to Support a Rural Economic Development Program. The Second Rural and Main Roads project was rated as moderately unsatisfactory. On account of higher per unit costs, fewer kilometers of secondary and tertiary roads planned have been rehabilitated, a common problem in a sector with very weak governance. The education project aims at improving primary education completion rates for over-age students from the baseline of 47 percent ninth grade gross completion rate, but the execution of the main component has only recently started, and it is therefore too early to evaluate its outcome.

PROJECT-LEVEL EFFECTIVENESS

4.9 The outcome ratings for Bank projects in Guatemala (89 percent satisfactory outcomes and 70 percent with a rating of moderate or lower on risk to development outcome) are higher than both the worldwide average for all developing countries (85 percent and 74 percent) and regional benchmarks (88 percent and 82 percent). However, as shown in Error! Reference source not found.1, the percentage of projects at risk by number or value is much higher than the regional average and has been worsening over time. The main cause of such problems is the very limited staff continuity in both ministries and PIUs. For example, over the past couple of years there have been four Ministers of Education, three top managers of FONAPAZ, and seven different heads of MFP. In other words, the well-known weaknesses and instability of the Guatemalan civil service are affecting project performance. Although country systems are regularly bypassed in financial management and procurement, the high staff turnover slows down implementation. The continuous turnover in PIUs and the delays in parliamentary approvals are causing these problems. As management often leaves as soon as it has achieved an understanding of how to operate, and it takes three years or more between design and project launch, it is logical to expect higher risks for projects during implementation.

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Figure 4-1. Guatemala—Share of Projects at Risk

Source: World Bank Data

Note: LCR= Latin America and Caribbean Region

2007 2008 2009 2010

Gatemala Problem Projects  (US$) 19.9 39.4 42.8 55.2

Gatemala Problem Projects  (No.) 22.2 33.3 42.9 57.1

LCR Problem Projects  (US$) 21.8 20.5 12.5 16.7

LCR Problem Projects  (No.) 23.5 23.1 24.3 21.5

0

10

20

30

40

50

60

%

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5. Impact of the 2007 GAC Strategy Implementation

5.1 The GAC Strategy has had a limited impact on governance in Guatemala. The creation of a CGAC team in the Bank’s Country Office, the additional resources made available for small grant funding not requiring parliamentary approval, and related pilots have improved understanding of the challenges ahead. However, impact has been limited to better awareness and understanding, and has not led yet to larger-scale operations.

5.2 Based on fieldwork and extensive consultations in headquarters and the Guatemala City Country Office, this evaluation found that Bank staff were almost universally committed to addressing governance concerns. GAC helped to enhance the focus on governance and to establish a dedicated team. This has led to better understanding of the issues involved throughout the country team. The key remaining challenge will be to translate the enhanced understanding of governance challenges into concrete actions for the next CPS.

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6. Lessons Learned

6.1 Based on this review of the Guatemala program, the following lessons have been identified:

The Bank should consider signaling through scaled-down support in countries where important governance challenges are not addressed. The real challenge in Guatemala is how to break the cycle of crime and violence, inequality, and unemployment. This requires addressing the security and justice sectors, for example, rather than moving away from them. If reforms in these sectors are minimal, the Bank should consider whether refusing to fund additional programs in the country could provide a stronger stimulus for reform than continuous support to longer-term strengthening of individual elements of country systems. The Bank’s convening power in these sectors could be more important than funding, which could be provided through bilateral grants that do not need parliamentary approval.

Country commitment to governance-related reform is essential. In a country with minority governments and institutions with weak credibility, the creation of broad-based support for governance reforms is indispensible. This is difficult for organizations like the Bank, whose main interlocutors are governments and whose mission differs from mere consultations. Governance efforts in fragmented polities require a much more nuanced approach—one that is flexible to the changing realities and that focuses on the common denominators (such as inequality, security, justice, and jobs).

The Bank should be aware of the risks of working on governance and anticorruption as shown by the United Nation’s CICIG. Although the Bank’s role will never be linked to prosecuting specific cases, as is the case for the CICIG, the risk of hurting the interests of powerful elites in an environment of impunity carries substantial security risks that the Bank may not be able to mitigate. At the same time, the Bank should consider whether providing more stable funding to organizations like CICIG, which rely on short-term voluntary contributions from donors that are often unpredictable, could be essential to its governance and anticorruption strategy in a country like Guatemala.

Support for PFM can be one of the most effective and durable areas of Bank-country dialogue over the medium term, but it needs to be based on a holistic rather than engineering or technocratic approach to PFM reforms and it needs to be sustainable from the beginning. Work on accountability should receive greater attention in the future Bank strategy for Guatemala, beyond the piloting that has characterized its approach in this field so far. To achieve sustainability, as recommended by DAC’s GOVNET, Bank support should shift from supporting accountability institutions like the CGC to accountability systems, moving in particular beyond pilots on the demand side.

Investment climate issues must be addressed through concrete actions. Investment climate issues are usually addressed through prior actions in DPLs. However, these actions need to be relevant and have a direct impact. Process indicators should be limited,

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and the focus should be on outcomes. Where outcome indicators have been used (for example on licensing or land titling), progress has been more substantial.

The Bank should facilitate policy continuity, but also act faster to translate ideas into programs. The future Parliament will probably be as fragmented as the current one. Lending may therefore take still a long time between design and implementation, and grant resources may remain the only option to operate efficiently. DPLs, usually enjoying faster parliamentary approval, may not be feasible under current fiduciary conditions.

In challenging governance situations, DPLs may not be the best instrument to use. First, country systems need to be brought to an acceptable level by building technocratic ownership through investment lending. Second, investment lending can also support institutional development across political administrations. Third, regular dialogue is needed with both government and the opposition.

External or externally-funded accountability mechanisms could be key in countries with a high level of informality and patronage, as shown by the CICIG or the CoST Initiative. In cases where domestic accountability does not work, citizens welcome some form of external accountability. This has been the case in Guatemala with the CICIG and could work with other aspects of governance. At the same time, there is a moral hazard risk that governments may simply benefit from the publicity and not follow through.

Poor public sector wages are an enduring challenge that undermine governance capacity. Innovative approaches to rolling out civil service reforms, sector by sector, show promise, but they can be delayed without strong cabinet-level management. The longstanding problem of poorly paid, low-skilled, overstaffed government agencies often reflects deep-rooted patronage problems. Given the complex political economy challenges in implementing pay and employment reforms across the board, the Bank has not provided operational support for civil service reform, leaving the task to bilateral donors (Spain) and other multilateral donors (Inter-American Development Bank). However, the lack of progress in civil service reform affects the Bank’s work in Guatemala in many respects.

Deep capacity deficits undermine governance. In post-conflict settings, investment in human capital is part of any viable GAC strategy. In addition to investments in education, the Bank should help develop human capital to build capacity through technical training institutes, local think tanks, and related knowledge sector institutions.

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References

Acción Ciudadana. 2007. “Indicadores de Acceso a La Información Pública en Guatemala.” Guatemala: Acción Ciudadana.

Acción Ciudadana. 2008a. “Indicarores de Acceso A La Información Pública En Guatemala”. Guatemala: Acción Ciudadana

______. 2008b. “Informe Del Monitoreo De Gasto De Campana En El Proceso Electoral 2007 En Guatemala.” Guatemala: Acción Ciudadana.

______. 2008c. “Índice de Acceso a la Información Pública del Organismo Ejecutivo 2010.” Guatemala: Acción Ciudadana.

______. 2010. “Informe de auditoria social al Programa Mi Familia Progresa 2010-Percepciones Ciudadanas.” Citizen Action Guatemalan chapter of Transparency International. Guatemala: Acción Ciudadana.

Akins Philip, Bedros Francis, Isikozlu Elvan, Novitskaia Julia and Stewart Prest. 2004. “Risk Assessment Brief-Guatemala.”Guatemala: Norman Paterson School of International Affairs. Accessed May 31, 2011. http://www.carleton.ca/cifp/app/serve.php/1088.pdf.

Andersson, K, C. Gibson and Lehoucq Fabrice. 2006. “Municipal Politics and Forest Governance: Comparative Analysis of Decentralization in Bolivia and Guatemala.” World Development 34 (3): 576–595.

Azpuru, Dinorah. 2008. “Political Culture of Democracy in Guatemala. 2008. “The Impact of Governance,” VIII Study on The Democracy Values of Guatemalans. Wichita State University, America’s Barometer, LAPOP, Vanderbilt University, and ASIES. Accessed May 31, 2011. http://www.vanderbilt.edu/lapop/ab2008/guatemala-en.pdf.

Briscoe, Ivan, and Martin Rodriguez Pellecer. 2010. “A State Under Siege: Elites, Criminal Networks and Institutional Reform in Guatemala.” The Hague, Netherlands: Netherlands Institute of International Relations ‘Clingendahel.’

Carleton University. 2007. “Country Indicators for Foreign Policy- Democracy and Governance, Guatemala.”Ottawa, Canada: Carleton University.

(CICIG) International Commission against Impunity in Guatemala. 2010. “Tercer Ańo De Labores. ” Guatemala : CICIG.

Economist Intelligence Unit. 2010. “Democracy Index 2010-Democracy in Retreat.” Accessed May 31, 2011. http://graphics.eiu.com/PDF/Democracy_Index_2010_web.pdf.

Global Legal Group. 2010. The International Comparative Legal Guide to Corporate Governance. London: Global Legal Group.

Government of Guatemala ,World Bank, Inter-American Development Bank ,European Commission 2010. “Informe del Desempeño de la Gestión de las Finanzas Públicas (PEFA).” Guatemala: Ministerio de Finanzas Públicas.

Inksater Kimberly. 2007. “Guatemala Country Context.” Accessed May 31, 2011. http://www.justgovernancegroup.org/Assets/GuatemalaCountryContext.pdf.

International Crisis Group. 2009. Guatemala at a Crossroads.

Isaacs, Anita. 2010. “Countries at the Crossroads. 2010: Country Report-Guatemala.” Washington: Freedom House

Kurtenbach, Sabine. 2008. “Guatemala’s Post-War Development-The Structural Failure of Low Intensity Peace.” Project Working Paper No. 3. Duisberg, Germany: Institute for Development and Peace.

Lopez, Meeylyn and Lorena Mejia. 2005. “Indigenous Women and Governance in Guatemala.” Ottawa: Canadian Foundation for the Americas (FOCAL).

24

Oxford Analytica. 2011. “Global Strategies Analysis: Guatemala.” Accessed May 31, 2011. http://www.oxan.com/display.aspx?ItemID=DB144262.

Peacock, Susan and Beltrán, Adriana. 2003. “Hidden Powers in Post Conflict Guatemala – Illegal Armed Groups and the Forces Behind Them.” WOLA.

Seligson, Mitchell and Amy Erica Smith. 2010. Political Culture of Democracy, 2010 Democratic Consolidation in the Americas in Hard Times: Report on the Americas. Washington, DC: USAID.

Transparency International. 2007. “National Integrity Systems. Country Study Report. Guatemala 2007.” Berlin, Germany: Transparency International.

USAID (United States for International Development). 2006. “Memoria Analítica del Foro “Transparencia en la Compra Pública de Medicinas.” Washington: USAID.

______. 2009. “Audit of USAID/Guatemala’s Democracy and Governance Program, Report No. 1-520-10-001-P. Washington, DC: USAID.

UNODC (United Nations Office on Drugs and Crime). 2010. “The Globalization of Crime. A Transnational Organized Crime Threat Assessment.” Vienna, Austria: UNODC.

United States Department of State. 2010. International Narcotics Control Strategy Report Drug and Chemical Control. Volume 1. Washington, DC: Bureau for International Narcotics and Law Enforcement Affairs (INCSR), United States Department of State.

World Bank and Inter-American Development Bank. 2005. “Guatemala Country Financial Accountability and Procurement Assessment Report (CFAA/CPAR)”. Washington, DC: World Bank, IADB.

World Bank. 2007a. “Corruption Warning Signs: Is Your Project at Risk?-Good Practices in Latin America and the Caribbean.” In Operational Innovations in Latin America and the Caribbean, World Bank. Washington: World Bank.

______. 2007b. “Control and Accountability Mechanisms in Conditional Cash Transfer Programs: A Review of Programs in Latin America and the Caribbean.” In Operational Innovations in Latin America and the Caribbean, World Bank. Washington: World Bank.

______.2007c. “ Improving Transparency and Accountability in World Bank Supported Projects: The Argentina Fiduciary Action Plan,” In Operational Innovations in Latin America and the Caribbean, World Bank. Washington, DC: World Bank.

______. 2009a. “Guatemala’s CGAC Experience-Challenges, Achievements and Opportunities.”Guatemala: World Bank.

______. 2009b. “Construction Sector Transparency Initiative.” Guatemala: World Bank.

______. 2009c. “Guatemala Poverty Assessment, Report No.43920-GT.” Washington: World Bank.

World Bank Institute. 2009. “Country Data Report for Guatemala, 1996-2009.” Washington: World Bank Institute.

APPENDIX A

25

Appendix A. Persons Interviewed Name Title/Organization GUATEMALAN GOVERNMENT OFFICIALS Donald Eduardo Cuevas Cerezo Director, Fiscal Evaluation and Analysis, Ministry of Finance Luis Arturo Guzmán Contraloría General de Cuentas: Nora Segura de Delcompare (Comptroller

General) Violeta Mazariegos Congress Transparency Coordinator Alfredo Mury Former Vice Minister of Communication Edgar Hernández Navas Vice Minister of Public Finance Linda Mayra Palencia Director, Public Credit Department, Ministry of Finance Lic. Roberto Monroy Rivas Vice Minister of Education Vivian Lemus Rodriguez Undersecretary for Public Investment DONOR OFFICIALS Ingjerd Haugen Adviser, Bank Section, Norwegian Agency for Development Cooperation Rein Koelstra Advisor for Governance and Gender, Embassy of the Netherlands Benedict Latto Governance Adviser & Deputy Team Leader, UK Development for International

Development Giske Lillhehammer Senior Advisor, Aid Strategy and Development Economics Department,

Norwegian Agency for Development Cooperation Per Oyvind Director, Aid Strategy and Development Economics Department, Norwegian

Agency for Development Cooperation Carla Aguilar Stwolinsky Democracy and Governance Advisor, USAID André Westerink Deputy Head ,Good Governance Division, Netherlands Ministry of Foreign Affairs CIVIL SOCIETY REPRESENTATIVES Vinay Bhargava Partnership for Transparency Francesco De Simone Senior Policy Advisor, Transparency International USA Jonathan Gant Policy Advisor, Global WitnessCorinna Gilfillan Head of U.S. Office, Global WitnessGerald Hyman Senior adviser and president of the Hills Program on Governance, Center for

Strategic and International Studies Nurul Islam Senior Research Fellow, International Food Policy Research Institute Lic. Manfredo Marroquín Regional Coordinator for Central America, Transparency International Daniel Ritchie Consultant, Partnership for Transparency Gopa Thampi Coordinator, ANSA- South Asia Regina Williams Finance and Fiduciary Expert, Norfolk State University INTERNATIONAL ORGANIZATIONS Francisca Talledo United Nations Development Programme (UNDP) International Consultant, Mia

Familia Progresa Program OTHER Hugo Noé Pino Executive Director, Instituto Centroamericano De Estudios Fiscales Álvaro Zepeda Chairman, Cámara de la Construcción

26

Appendix B. Guatemala—Country Data Sheet, IEG Ratings of GAC Responsiveness, 2004-2010

Country Assistance Strategy Desk Review Results

Selectivity 

   Pre‐GAC (04‐07)  Post‐GAC (08‐10) 

Explicit assessments of governance and political economy constraints 

Highly Incorporates 

Somewhat Incorporates 

Explicit choice of governance entry points 

Highly Incorporates 

Somewhat Incorporates 

Mix of financial and knowledge instruments 

Somewhat Incorporates 

Does not incorporate 

Identification of results measures 

Does not incorporate 

Does not incorporate 

Overall rating of country strengthening 

   Pre‐GAC (04‐07)  Post‐GAC (08‐10) 

Core public sector institutions 

To a great extent  To a great extent 

Sectoral state institutions  Not at all  Somewhat 

Domestic accountability   Somewhat  Not at all 

Civil society and the demand side  Not at all  Somewhat 

The investment climate  Somewhat  Somewhat 

Overall rating of signaling of GAC concerns and risks through Bank portfolio processes 

   Pre‐GAC (04‐07)  Post‐GAC (08‐10) 

Portfolio risks are regularly monitored by the Bank  Not at all  Somewhat 

Portfolio processes track the progress of governance reforms at sector and project levels  Somewhat  Somewhat 

Portfolio reviews and results monitoring are regularly disclosed  Not at all  Not at all 

Overall rating on results 

   Pre‐GAC (04‐07)  Post‐GAC (08‐10) 

Quality of indicators  Moderate  Moderate 

Collection of data  Moderate    

Disclosure of data collected  Satisfactory    

Overall rating of GAC responsiveness in the CAS 

   Pre‐GAC (04‐07)  Post‐GAC (08‐10) 

Minimized fiduciary risk  Somewhat  Somewhat 

Selectivity of Bank country strategies and programs  Somewhat  Somewhat 

Signaling of GAC concerns and risks through Bank portfolio processes  Not at all  Somewhat 

Smart design of programs and projects by countries  Not at all  Somewhat 

Country system strengthening 

To a great extent  Somewhat 

Projects: Smart Design Overall Rating

2009 Country Policy and Institutional Assessment (CPIA) Ratings for Guatemala and Comparative

Country Bolivia Dominican Republic

Ecuador

El Salvador

Guatemala

Property rights and rule-based government 2.5 3.0 2.0 3.0 2.5 Quality of budget and financial management 3.5 3.0 2.5 4.0 3.0

Efficiency of revenue mobilization 4.0 4.0 3.5 4.0 3.5

Quality of public administration 3.0 3.0 2.5 3.5 3.0 Transparency, accountability, and corruption in public sector 3.5 3.0 2.0 3.0 3.0

Cluster average 3.3 3.2 2.5 3.5 3.0

Overall rating 3.8 3.5 2.8 4.1 3.7

0 1

Quality of governance and political economy analysis

Quality of fiduciary aspects

Demand‐side of governance

Use of country systems

Quality of institutional  strengthening

Results orientation

Smart Design Ratings Post‐GAC

To a Great Extent Somewhat Not at all

 

27

Appendix C. Statistical Tables

ICR & IEG Project Ratings for Guatemala FY04-10

Country CAE Period of evaluation Date of review (FY) CAE Rating

Guatemala FY85-FY01 12/1/2002 MS Country CAS Period CASCR Review Period IEG CASCR-R Rating Guatemala FY05-FY08 FY05-FY08 S

Exit FY Proj ID Proj name Total

evaluated ($M)

Lending

instrument

ICR outcome

rating

ICR k to out ng

ICR sustaina

bility rating

ICR overall bank perf

rating

ICR overall

borrower perf

rating

IEG outcome

rating

IEG sustainability rating

IEG overall Bank perf

rating

IEG overall

borrower perf rating

FY04 P048756 Private Participation Infrastructure Technical Assistance

7.7 TAL U # UN S U MU UN S U

FY05 P054462 Land Fund 23.0 APL S # L S # MU # # # FY05 P064883 Western Altiplano NRM 0.0 SIL # # # # # # # S U FY06 P049386 Reconstruction and Local

Development 19.7 SIL MU S # MU MU MU # # #

FY06 P094365 Growth DPL I 100.0 DPL S M # S S MS # S # FY07 P035737 Rural and Main Roads 64.9 SIL S M # S S MS # S # FY07 P047039 Judicial Reform 32.2 SIL MU M # U MS MS # # # FY07 P048654 Tax Administration 19.0 TAL MS M # S MS MS # S # FY07 P049616 Land Administration 30.3 APL MS M # MS MS U # # # FY07 P074530 Financial Sector

Adjustment Loan 150.0 SAL S M # HS HS S # HS S

FY07 P094897 Second Broad-Based Growth DPL

100.0 DPL S M # S S MS # S #

FY08 P101311 DPL III 100.0 DPL S M # S S MS # S # FY09 P048652 Universalization of Basic

Education 61.1 SIL S H # S S S # # S

FY09 P055084 Competitiveness Project 12.9 SIL MS M # S MS MS # # # FY09 P076853 Financial Sector Technical

Assistance Loan 2.8 TAL S M # S S S # S S

Note: CAE= Country Assistance Evaluation; CAS= Country Assistance Strategy; DPL = development policy loan; ICR= Implementation Completion Report; IEG= Independent Evaluation Group. Ratings: HS= highly satisfactory; MS= mostly satisfactory; MU= mostly unsatisfactory; S= Satisfactory; U= unsatisfactory. Source: Internal World Bank database as of 11.23.10

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IEG Project Ratings for Guatemala and Comparators, FY04-10

Region Total

evaluated (US$M)

Total evaluated (number)

Outcome %

satisfactory ($)

Outcome %

satisfactory (number)

Risk to development

outcome % moderate or

lower ($) *

Risk to development outcome

% moderate or lower (number) *

Guatemala 723.8 15.00 88.8 71.43 70.40 53.85 Bolivia 510.8 18.00 62.1 55.56 81.24 50.00 Dominican Republic 342.5 8.00 64.3 75.00 27.04 66.67 Ecuador 267.9 16.00 62.1 66.67 68.41 71.43 El Salvador 332.9 10.00 100.0 100.00 100.00 100.00 LCR 23,152.8 337.00 87.6 80.75 81.83 73.77 World Bank 96,831.8 1,507.00 85.2 77.79 73.66 63.72

Source: Internal World Bank database as of 11.23.10. Note: LCR= Latin America and Caribbean Region. * With IEG new methodology for evaluating projects, institutional development impact, and sustainability are no longer rated separately.

29

Portfolio Status for Guatemala & Comparators, FY04-10

Fiscal year 2004 2005 2006 2007 2008 2009 2010

Guatemala # Proj 13 11 12 9 9 7 7Net Comm Amt 558.6 502.8 549.8 385.2 403.7 402.8 432.3 # Prob Proj 2 0 0 2 2 3 4# Proj At Risk 2 0 0 2 3 3 4% At Risk 15.4 - - 22.2 33.3 42.9 57.1 Comm At Risk 79.5 - - 76.7 159.0 172.3 238.8 % Commit at Risk 14.2 - - 19.9 39.4 42.8 55.2

Bolivia # Proj 15 12 6 5 11 11 11Net Comm Amt 552.7 477.7 265.6 190.4 272.8 302.8 302.8

# Prob Proj 4 3 2 2 1 2 2# Proj At Risk 4 4 2 2 1 5 5% At Risk 26.7 33.3 33.3 40.0 9.1 45.5 45.5 Comm At Risk 61.8 127.3 105.4 97.0 20.0 142.4 149.0 % Commit at Risk 11.2 26.6 39.7 50.9 7.3 47.0 49.2

Dominican Republic # Proj 10 9 8 7 9 9 10Net Comm Amt 265.2 382.5 304.1 291.8 408.2 285.7 316.2

# Prob Proj 2 5 4 1 2 1 0# Proj At Risk 2 5 4 1 2 1 3% At Risk 20.0 55.6 50.0 14.3 22.2 11.1 30.0 Comm At Risk 47.0 174.8 212.3 25.0 44.4 25.0 117.5 % Commit at Risk 17.7 45.7 69.8 8.6 10.9 8.8 37.2

Ecuador # Proj 11 10 9 9 4 2 1Net Comm Amt 251.9 307.3 299.3 310.1 40.1 18.7 15.3

# Prob Proj 1 6 1 5 1 0 1# Proj At Risk 2 6 2 5 2 0 1% At Risk 18.2 60.0 22.2 55.6 50.0 - 100.0 Comm At Risk 39.7 220.9 21.9 226.9 21.4 - 15.3 % Commit at Risk 15.8 71.9 7.3 73.2 53.3 - 100.0

El Salvador # Proj 6 8 8 4 3 4 8Net Comm Amt 380.8 481.0 448.0 194.8 170.8 620.8 870.8 # Prob Proj 0 2 3 1 0 1 1# Proj At Risk 0 2 3 1 0 1 1% At Risk - 25.0 37.5 25.0 - 25.0 12.5 Comm At Risk - 160.8 150.2 5.0 - 18.2 5.0 % Commit at Risk - 33.4 33.5 2.6 - 2.9 0.6

LCR# Proj 265 268 256 247 260 263 270Net Comm Amt 18,911.1 18,595.3 16,208.0 16,408.1 17,848.8 25,683.7 31,610.2 # Prob Proj 39 48 37 38 40 37 42# Proj At Risk 46 59 44 58 60 64 58% At Risk 17.4 22.0 17.2 23.5 23.1 24.3 21.5 Comm At Risk 3,580.1 3,831.7 2,557.7 3,584.2 3,666.6 3,201.9 5,264.0 % Commit at Risk 18.9 20.6 15.8 21.8 20.5 12.5 16.7 Source: World Bank internal database as of 11/24/2010.

30

IBRD/IDA Net Disbursements and Charges Summary Report for Guatemala (in US$ Mil)

FY Disb. Amt. Repay Amt. Net Amt. Charges Fees Net Transfer

200437.50 24.22 13.29 17.17 0.99 ‐4.88

200576.72 31.34 45.38 15.29 1.30 28.79

2006144.03 34.59 109.44 22.86 0.98 85.59

2007196.79 36.12 160.67 30.88 0.68 129.11

2008131.79 52.18 79.61 41.44 1.04 37.14

2009229.69 70.36 159.33 36.78 0.81 121.74

2010474.36 74.35 400.00 43.95 1.26 354.80

Total (2004-10) 1,290.9 323.2 967.7 208.4 7.1 752.3

Source: WB Loan Kiosk, Net Disbursement and Charges Report as of 11/24/10.

 

32

ODA Disbursement Amount type Current Prices (USD millions) Year 2004 2005 2006 2007 2008 2009

Donor All Donors, Total 217.12 256.59 484.29 454.38 536.03 376.2 DAC Countries, Total 204.56 220.54 447.42 415.19 469.66 341.37 Multilateral Agencies, Total 12.4 35.75 36.67 38.94 66.07 34.18 Non-DAC Countries, Total 0.16 0.3 0.2 0.25 0.3 0.65 G7, Total 111.91 99.28 132.21 70.75 126.81 142.53 DAC EU Members, Total 102.09 113.48 308.45 318.6 357.17 209.69 Australia .. .. 0.03 0.14 .. .. Austria 6.77 5.82 7 6.84 6.22 6.66 Belgium 4.07 3.38 3.38 3.33 4.44 5.2 Canada 7.56 8.13 10.22 11.18 15.02 7.08 Denmark 3.67 2.24 3.69 2.41 1.93 1.52 Finland 2.13 0.43 0.64 0.9 0.41 0.5 France 2.41 3.37 3.59 2.86 2.58 2.87 Germany 23.29 18.14 17.88 17.3 18.81 16.13 Greece .. 0.04 .. .. .. 0.07 Ireland 0.56 0.76 1.25 1.91 2.48 1.61 Italy 0.05 -1.63 -0.93 3.66 8.79 5.87 Japan 25.37 32.84 38.86 17.65 10.6 25.97 Korea 0.89 1.45 2.28 2.77 4.03 3.95 Luxembourg 0.12 0.3 0.17 0.19 0.2 0.49 Netherlands 20.92 26.42 20 25.22 27.42 28.35 New Zealand 0.09 0.17 0.83 0.45 0.07 0.08 Norway 12.97 20.95 14.94 14.83 11.34 7.71 Portugal .. .. 0.02 .. 0.06 .. Spain 22.39 38.92 223.79 252.85 255.87 113.43 Sweden 16.02 15.22 32.63 28.74 27.3 26.27 Switzerland 2.05 5.16 4.56 3.86 1.08 3 United Kingdom -0.31 0.07 -4.66 -27.61 0.66 0.72 United States 53.54 38.36 67.25 45.71 70.35 83.89 EU Institutions 23.26 29.99 31.65 30.76 39.05 27.95 Czech Republic 0.02 0.12 0.04 0.05 0.05 0.05 Israel 0.14 0.18 0.13 0.19 0.25 0.54 Thailand .. .. .. 0.01 .. 0.01 Turkey .. .. .. .. .. 0.04 Other Donor Countries, Total 0.14 0.18 0.16 0.2 0.25 0.55 Arab Agencies -1.45 1.16 1.57 -1.29 -2.27 0.39 GEF 0.99 2.85 .. 4.41 2.93 0.2 Global Fund 1.53 6.93 7.21 10.73 21.33 4.66 IAEA .. .. 0.27 0.21 0.55 0.22 IDB Spec. Fund -16.74 -15.26 -15.36 -14.29 -4.31 -3.65 IFAD 0.77 0.78 1.97 1.59 1.37 -1.43 UNAIDS .. 0.52 0.26 0.53 0.6 0.59 UNDP 0.75 0.95 0.98 0.68 1.12 0.92 UNFPA 0.58 0.71 0.6 0.8 1.29 1.29 UNHCR .. .. .. .. .. .. UNICEF 1.09 1.03 0.97 1.1 1.59 0.84 UNTA 1.18 2.45 1.62 1.25 0.62 0.62 WFP 0.44 3.64 4.93 2.46 2.2 1.58 IDA as a share of ODA NA NA NA NA NA NA

Source: Data extracted on Dec 16 2010 15:27 UTC (GMT) from OECD.Stat Note: DAC= Development Assistance Committee; EU= European Union; GEF= Global Environmental Fund; IAEA= International Atomic Energy Agency; IDA= International Development Association; IDB= Inter-American Development Bank; IFAD= International Fund for Agricultural Development; ODA= official development assistance; UNAIDS=United Nations Program on HIV/AIDS; UNDP= United Nations Development Programme; UNFPA= United Nations Population Fund; UNHCR= United Nations High Commissioner for Refugees; UNICEF= United Nations Children’s Fund; UNTA=United Nations Program for Technical Assistance; WFP= World Food Programme.